Huge piles of BS-IV inventory becomes new headache for Auto manufacturers as deadline looms

Despite production cut by major auto manufacturers, the huge stocks of BS-IV vehicles at the dealerships have become a new headache as the deadline nears. As per the governments' direction, the registration and sale of any BS-IV vehicle will not take place April 1 onwards. With the new regime almost 40 days away, the dealerships are witnessing a huge inventory of vehicles lay unsold.

As per a report from the Economic Times, the struggle for the auto industry is far from over. The data for the month of January showed that retail sales of vehicles tanked for the second consecutive month in January 2019. The new vehicle registration application at the regional transport authorities which is a way to calculate retail sales of a vehicle plunged 7.2 percent in January in comparison to last year's same period. Further, the two-wheeler and commercial vehicles also registered a steep decline at 8.8 percent and 6.9 percent.

It is to be noted that at the end of January, the inventory left with dealers averaged between 25 and 30 days of stock for two-wheelers and commercial vehicles. A data collected by the Federation of Automobile Dealers Associations (Fada) an industry body of vehicle retailers showed that for the passenger vehicles the duration was between 15 and 20 days. The main concern of the industry is that the majority of this inventory is of BS-IV vehicles. All these vehicles will have to be written off after April 1 when Bharat Stage-VI emission standards take effect.

Confusion regarding the regime changeover hampering sales: FADA

Fada President Ashish Harsharaj Kale said, "We have requested the manufacturers that any BS-IV vehicles billed further, which are not against specific customer orders, should be on a returnable basis to avoid financial loss to dealers." He further added that the decline in sales in January is due to the confusion amongst the customer regarding the switchover to BS-VI standards and many of them are delaying their purchase till the end of March. The recovery in the auto sector was expected at the start of New Year but the outbreak of Coronavirus has dashed any such hopes.